Asian bonds tighten; Sri Lanka dips; Pakistan weakens; Angola on deck; Ecopetrol sees interest

By Christine Van Dusen

Atlanta, Oct. 30 – Asian bonds opened unchanged to slightly tighter on Friday, with some technology names seeing some profit-taking, while Sri Lanka’s new issue ticked lower and investors awaited new notes from Angola.

“End of a another tricky week, and month, for that matter,” a London-based trader said. “The market, I think, is in a somewhat balanced position. On the one hand new issues are getting done ... on the other hand some secondary bonds remain offered and very tricky to shift.”

Bigger accounts are in wait-and-see mode, he said, “as anecdotal evidence points to lower deposits and poorer liquidity at regional banks.”

From the Middle East, Bahrain had a challenging week, with some paper coming out, as did Saudi Electricity Co., he said.

“Spreads, overall, have been boosted by the rates move to 2.16%,” he said. “However, the feel from here in the trenches is the market is a little sloppy, Street liquidity dire, most positioned the same way around and depth simply not there. Will be an interesting final two months of a pretty testing year, all told.”

In other trading on Friday, investment grade financial names from Asia opened firmer, with spreads tightening 2 basis points to 4 bps.

“The Korea sector outperformed today,” he said. “In Philippines and Indonesia, the long end was down about one point while the belly was about ½ point lower.”

And Sri Lanka’s new $1.5 billion 6.85% notes due in 2025 that came to the market Tuesday at par were seen Friday at 99 bid, 99¼ offered after trading Thursday at 99 3/8 bid, 99 5/8 offered.

Citigroup, Deutsche Bank, HSBC and Standard Chartered were the bookrunners for the Rule 144A and Regulation S deal.

Ukraine sees two-way flows

From Ukraine, bonds entered the end of the week with two-way flows in quasi-sovereign banks, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Finance Minister Jaresko announced an exchange date of Nov. 12 for the sovereign bonds and also said that Russia did not participate with its $3 billion bond,” he said.

Pakistan bonds weaken

Bonds from Pakistan were weaker on Friday morning as peripheral sovereigns from Asia saw some selling, another trader said.

“We have seen real money adding in the sukuk, and most are happy to own the curve here and still like the story,” he said.

The sovereign’s recent issue of $500 million 8¼% notes due Sept. 30, 2025 that priced at par traded Friday morning at 106.88 bid, 107.62 offered.

Citigroup, Deutsche Bank and Standard Chartered were the bookrunners for the Rule 144A and Regulation S deal.

Angola on deck

In deal-related news, investors were still keeping an eye out for Angola’s debut bond, which is expected to total about $1.5 billion and carry a 10-year tenor.

“We think Angola might need to offer a yield closer to the 10% area, in current market conditions,” a trader said. “Investors will demand a concession for the large issue size.”

The proceeds will be used to finance future infrastructure projects.

Lat-Am in focus

Looking to Latin America, inquiries were mostly light and market movements minimal on Friday morning, even for names like Gerdau SA, which recently made some significant moves, a New York-based trader said.

Chile-based Ecopetrol SA, meanwhile, “started to pull itself out of the weeds, in terms of volumes and inquiry,” he said. “Clients are starting to nibble again.”

Among sovereigns, Brazil’s five-year credit default swaps spreads finished the week at 437 bps from 442 bps, while Mexico was basically unchanged at 150 bps, another trader said.

Latin American high-yield names finished more or less unchanged, he said, with Venezuela’s 2027s moving to 44.25 from 44 and PDVSA’s 2017s closing at 60.70 from 61.

“The morning saw better sellers of low-beta, off-the-runs, whereas the afternoon consisted predominantly of buyers in currents,” he said.

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